One of the most challenging tasks customarily faced by members of the public is shopping for and buying a new car. The shopper usually has fewer skills in negotiating a deal, and the car salesperson is highly motivated—he or she sells on commission and the more cars move, the more money made. Unfortunately, buying a car could become an adversarial situation if the car shopper is not prepared.
The first step in buying an auto is the deliberate arrival at the decision to make a purchase. The next is to focus on the type of vehicle which fills your needs: 4-door sedan, pickup truck, SUV (they used to be called station wagons) or something else.
Determining how much money can be expended on the buy is the second step, and figuring out whether sufficient cash is available or if financing is necessary comes before actual shopping. Visiting several financial institutions and securing a loan to determine the most favorable repayment schedule before setting foot in a dealership is always a good policy.
If a customer already knows which car or truck he or she wants and how it will be paid for before visiting a dealership, this allows the customer to focus exclusively on the vehicle and its actual cost.
By law, new cars sold in the US have an MSRP (Manufacturers Suggested Retail Price) sticker posted showing the price, accessories and other information. Learn this important information on your target car or truck to better deal with any negotiations.
After you find the vehicle of interest, test driving is the next step. Driving an unfamiliar car half a dozen miles doesn’t reveal how comfortable that car will be to drive over the next several years. If possible, it might be prudent to rent the type of car one has in mind for a week. Basing a purchase of thousands of dollars on a single fifteen minute test drive is not always prudent. It would be a shame to spend a lot of money on the wrong car.
Early in the confrontation with the salesperson, the issue of a trade-in will be broached. Customarily trade-ins are credited against the purchase at wholesale value to which is added a discount off of MSRP. Car dealerships make substantial profits on used cars in which they have only wholesale dollars plus some repairs invested. They buy low and sell high.
It’s best to be non-committal about any possible trade. Instead, work on obtaining the the dealer’s maximum discount. Injecting the trade issue will then reveal the amount allowed for the used car.
Allowing the dealership to believe that they can finance the purchase holds out the prospect of additional profits to be gained from the financing. Salespeople earn extra commissions by selling the financing package. Leading the salesperson to anticipate a commission from financing may induce him or her to include a more significant discount off of MSRP.
Only when the absolute best price is arrived upon, comes the time to reveal your predetermined means of payment: your own financing or cash.
If the price of the car seems to be an issue, the salesperson may challenge the buyer with “it’s a good purchase, if you can afford it.” This approach is geared to question the buyer’s ability to pay and prompt the buyer to “prove” his ability to make the purchase right then and there. The proper response might be, “we can find a way to afford it if we really want it.”
Working the salesperson by agreeing to the selected car is okay, except for the color, reverses the salesman who might reply, “What would we have to do to get you to buy this car?” Making an abnormally low offer will likely prompt the salesperson to say he or she would have to “take this offer to the manager.” This tactic is best used only if one is ready to buy right at that moment.
If the salesperson says he or she has to consult the manager, that’s the time to take out cash. I recommend $500 in crisp new bills and instruct the salesperson to have it in hand when he or she consults with management. As long as the dealership is making some profit on the transaction, a sale will be customarily concluded.
A word of warning, never ask the salesperson to give you his or her “best price.” Once the salesperson quotes a price, he or she has locked the figure and to change that number, he or she would have to admit to lying. In this circumstance, the salesperson cannot do better on price.
A funny anecdote happened to me once that help cast me in a much more powerful position during the negotiations for a new car. I had recently written about some trivial matter to a member of Congress, and just as we returned from the test drive, my cell phone rang. The caller was a staff aide from the congressman’s office, and he was seeking additional information on my correspondence. As I was sitting in the dealership parking lot, the car salesman only heard my end of the conversation and presumed that I was on the phone with the congressman himself. From this, I deduced that the salesman was sufficiently impressed to grant us a favorable price. At least no other dealer we shopped could come anywhere close to that price at which we bought the car in question.
Steve Sevits spent a portion of his career as a retail dealership automobile salesman for one of the Big Three automobile manufacturers.